Robust Outlook Projected for Banks in 2011

Top Quote As investors salivate and eagerly wait for corporate earnings announcements by banks for 2011, research analysts at Cordros Capital Limited, a dealing member of the Nigerian Stock Exchange (NSE), have projected robust outlook for the banking stocks End Quote
  • (1888PressRelease) February 11, 2012 - In a special report, titled: 'Full Year 2011 Earnings Expectation,' obtained by THISDAY, Cordros Capital Limited, which was one of the top firms with highest equities transactions on the NSE in 2011, projected that the banks would end the year with higher profit.

    They equally noted that giving the higher profit, the banks would also reward shareholders with higher dividends.

    Specifically, the analysts said First Bank of Nigeria Plc would declare gross earnings of N278.368 billion for the year ended December 31, 2011 and a profit after tax (PAT) of N42.9 billion. Out of the profit, First Bank, Cordros Capital noted, would likely recommend N35.4 billion as dividend. They forecast a return on equity of 15.69 per cent for investors in the bank.
    For Zenith Bank Plc, the analysts said the financial institution might end the year with gross earnings of N217.955 billion and profit after tax of N51.631 billion. Shareholder are likely to share N34 billion as dividend, while a return of equity of 15.05 per cent has been envisaged.

    Commenting on Guaranty Trust Bank Plc, Cordros Capital noted that the bank would record gross earnings of N170.141 billion and profit after tax of N50 billion. Dividend to be shared by the shareholders is estimated to be N38.421 billion.

    The Cordros Capital Limited analysts said that their positive outlook for 2011 earnings in the banking sector was premised on increasing economic prospects for the Nigerian economy, expectation of good earnings buffer with strong interest margins, income diversification strategies of banks, AMCON rescue activities and stronger regulatory oversight.

    "Earnings momentum as indicated by third quarter (Q3) 2011 results announcements of banks remains positive. Based on this, we expect banks performance for the FYE 2011 to be in line with previous quarterly results announcement," they said.

    According to them, as at Q3 2011, most banks including Access Bank, Ecobank Nigeria Plc; First City Monument Bank Plc, First Bank of Nigeria Plc, GTBank and Zenith Bank have recorded earnings per share (EPS) value in excess of full year expected EPS for 2011.

    “We strongly believe a stable 2011 full year EPS will sustain banks dividend payout. Thus, we opined that dividend yield for 2011 will surpass 2010 . Lower PE ratio also supports likely share price increase. Financial performance for banks in full year estimate in 2011 will be driven by our expectation for improving operating income impacted by higher transaction volume, lower impairment charges and funding costs, greater cost management focus and increase deposit funds combined with strong liquidity indicators,” they said.

    The analysts added that earnings would be bolstered by the recent increase in oil prices and gains in other liquid assets.

    "We expect banks' assets quality to improve considerably following successive declines in banks' non-performing loans (NPLs) as well as improvement in diversification in loan books. We also expect stronger balance sheet position based on Asset Management Corporation of Nigeria (AMCON)'s purchases of NPLs of banks," they declared.

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